The Roadmap to Pay Transparency for UK organisations – where to even begin?

Whilst the UK does not have pay transparency legislation and there is none on the horizon, many organisations embrace or want to embrace the principles of it. It is quite a journey – well over a year in most cases – and so Reward Heads have put together a roadmap based on our experiences of our own journey and that of our clients.

“We will talk about what we mean by pay transparency – we don’t mean putting the Exec team’s salaries on the canteen wall or the intranet (unless you want to!) and being clear on start and end points and some key steps.”

So where to even begin? The task seems so daunting but actually if we break it down into manageable steps you may realise you are either on your way or you can plan some achievable milestones for 2025. So, let’s start with the all-important foundations which are steps 1 -3 of our roadmap.

What do we mean by Pay Transparency?

Pay transparency involves organisations openly sharing pay details with current and prospective employees, aiming to promote pay equity. This transparency can manifest in various ways, such as disclosing salary ranges inside and outside the organisation, explaining how salaries are set and increased, or sharing individual salaries within an organisation.

Whilst talking about pay has historically been seen as taboo in many places, it is increasingly embraced, particularly in countries with legislation, like the European Union’s Pay Transparency Directive and U.S. state laws. Whether the UK is ready is up for debate?

Over the next 3 weeks we will be taking you through a structured roadmap for implementing pay transparency effectively. We will share our step-by-step guide on how to progress towards implementing pay transparency within your organisation.

Step 1 - Where Are We Now? Understanding Current Pay Arrangements

Before planning any journey, you need to know your start point. Hence before embarking on the journey to pay transparency, it’s crucial to assess the current state of pay structures and principles. Consider whether your leadership team would be comfortable disclosing current pay ranges if required. Leadership engagement is pivotal: buy-in from the top ensures a unified approach towards transparency.

Begin by reviewing existing pay practices:

·       Reward Philosophy and Principles: Does your organisation have a clear reward philosophy and principles? Are they documented and communicated effectively?

·       Pay Decisions and Policies: How are pay decisions made? Is there a documented pay policy and governance structure? Is that easily available to employees?

·       Base Salary Determination: What factors influence base salary (skills, contribution, length of service, performance)?

·       Use of Market Data: How is external market data utilised? Is benchmarking conducted regularly?

·       Job Architecture: Is there a job architecture in place? Are jobs evaluated fairly against comparable roles?

·       Communication: How transparent are current communications about pay within the organisation?

So now you know your start point. What about the destination?

Step 2 - Where Are We Trying to Get to and How: Creating a Pay Philosophy and Principles

A clear reward philosophy and set of principles are essential for guiding pay transparency efforts. This philosophy should reflect your organisation’s values and beliefs about rewarding employees. For instance, a philosophy might state: "We aim to reward our people fairly, transparently, and competitively, supporting our commitment to fostering a culture of trust."

Defining Reward Principles

Reward principles should underpin your pay philosophy, ensuring consistency and fairness. Examples include:

·       Transparency: "Our packages are simple to understand, and we share pay and benefits details at all levels."

·       Equity: "Our pay structure is fair to all employees, regardless of background."

·       Competitiveness: "Our compensation packages are benchmarked against relevant external markets and meet or exceed the market median."

Developing a Pay Policy

A comprehensive pay policy supports the pay philosophy and provides a framework for decision-making:

·       Involved Parties: Define who is responsible for deciding pay (e.g. HR, line managers).

·       Pay Principles: Establish principles for market positioning (e.g. median, in X sector or geography, total cash basis) and how pay ranges are set (e.g. 10% either side of median)

·       Pay Approach: Decide on job families vs. market pricing, the frequency of pay range reviews, and the width of ranges.

·       Pay Progression: Outline how pay will progress during employment, including annual reviews, promotions, and out-of-cycle increases.

·       Governance: List roles responsible for total reward governance and define agenda items for regular meetings.

·       Authority Levels: Specify who can approve pay changes and at what levels.

“Making this visible to all employees is a huge step on the transparency journey. Transparency of policy and process can be more important than the numbers themselves.”

Step 3 - Developing a Robust Levelling Framework

A levelling framework helps benchmark pay and ensure fairness and is a critical step. It involves determining the levels or grades for roles (not individuals) based on criteria like expertise, decision-making, and planning.

At Reward Heads we often recommend a bespoke framework which can tie back to a range of data sources. This tailored framework can align with organisational values and language and supports equity. It avoids overly complex proprietary frameworks that may not fit your organisational structure.

So perhaps the task seems a little less daunting or at least getting started may now feel like less of a mountain to climb. You may well be doing all of these things already but now is a good time to take stock and really question whether what you have in place is right or is it time to review your reward basics. Are you clear on where you are going? Is your levelling framework really fit for purpose? And if you are ready to ‘phone a friend’, please reach out.

At Reward Heads , we have many years of experience across the team in all of these areas and would love to support you in your journey. Please contact our CEO, Victoria Milford , on victoria@rewardheads.co.uk or rewardsolutions@rewardheads.co.uk

Our next article will take you through the next steps in our roadmap as we go deeper into the topics of pay and career progression as you prepare further for your transparency journey. These are critical and challenging steps so please check back in to see how we advise you tackle these areas.